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The Growing Supply Chain Landscape: CSR Takes the Lead

From medium-sized businesses to members of the Fortune 500, organizations are investing heavily to ensure sustainability and corporate social responsibility (CSR) are ingrained across their supply chains – and they are already seeing major returns.

Consider the results of the 2017 Sustainable Procurement Barometer, recently released by EcoVadis and HEC Paris. The data, gathered from supply chain professionals around the world, shows multiple business drivers behind a global maturation of the supply chain sustainability market. The research found three primary drivers of sustainability:

Brand reputation – identified as a critical factor by 63 percent of organizations;

Risk mitigation – identified as a critical factor by 61 percent of organizations; and

Compliance – identified as a critical factor by 57 percent of organization.

For the most mature organizations, the benefits are even more tangible. Sustainable procurement is directly impacting the bottom line. In fact, 50 percent of sustainable procurement leaders experienced increased revenue from sustainability initiatives in 2016, which represents 33 percent increase over non-leaders.

For organizations looking to expand their sustainable footprint, supply chain transparency plays a critical role. However, only 15 percent of organizations have complete supply chain visibility into the CSR and sustainability performance of both tier one and two suppliers. Beyond that, only six percent of organizations report having full visibility into tier three suppliers and beyond, according to the research.

While supply chain visibility continues to be a top challenge for procurement organizations today, nearly every organization surveyed (97 percent) places a high level of importance on sustainability. This consensus among supply chain leaders illustrates just how established the sustainable procurement field has become — a major development in less than 10 years’ time.

Interestingly, the report found that over the past three years, the sustainable procurement landscape has shifted its emphasis away from environmental issues and toward social, labor and business ethics. Consider the following findings:

Only 18 percent of organizations are placing significantly more importance on the environment today than they were three years ago;

33 percent of organizations are placing significantly more emphasis on social and labor issues than three years ago; and

33 percent are placing significantly more emphasis on business ethic.

What is driving one-third of respondents toward a more socially and ethically responsible supply chain? Perhaps the answer lies in the fact that while social issues continue to grow, environmental efforts may have peaked—these efforts have been maturing for a much longer time, and feasibly came to a head in 2015 with COP21. Meanwhile, the rise of due diligence laws—California Transparency, UK Modern Slavery Act, EU Conflict Minerals and the Devoir de Vigilance bill—are shining a spotlight on social and labor issues in the supply chain.

Consumers are also making their preferences felt when it comes to responsible sourcing. Unilever recently surveyed more than 20,000 people across five countries to gauge sentiment around brands using socially and environmentally responsible practices. The study found that one third of consumers intentionally buy from brands that are doing social or environmental good, an opportunity that represents more than one trillion dollars for brands that make their sustainability credentials clear.

While the sustainable procurement landscape is still in its infancy, it’s rapidly growing and maturing across the globe. The increase in consumer pressure, and the competitive benefits of operating in a sustainable fashion, will continue to push companies to become more socially responsible and scale their sustainability efforts. This evolution will set the stage for a new phase of sustainable procurement maturity in 2017 and beyond—one where the leaders continue to generate tangible business value and scale programs further, and the laggards either get in the game, or risk falling dreadfully behind.

—Pierre-Francois Thaler, co-founder and co-CEO of EcoVadis.

EcoVadis is a supplier sustainability ratings company that helps organizations institute corporate social responsibility and various sustainability programs. EcoVadis Twitter: @ecovadis